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Banking Newsletter

DOWNLOAD FALL 2023

Inside Fall 2023 Issue

Banks Are Most Affected by Fraud

Fraud in Banks - Are You Keeping Occupational Fraud Under Control?

According to the Association of Certified Fraud Examiners (ACFE), the banking and financial services industry consistently tops the list of industries most frequently affected by occupational fraud. Among other things, this article discusses several categories of occupational fraud as well as some common fraud schemes and detection methods. A brief sidebar summarizes the antifraud controls that were most effective in terms of reducing fraud losses and duration.

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Proactive Due Diligence on Loans Pays Off

Building Your Core Deposits

Building Your Core Deposits for the Long Term

Community banks need to stay at the top of their game to maintain both stability and profitability. This article points out that banks have many technological, regulatory and digital factors to consider in the effort to stay competitive. It notes that a key factor in that effort is to focus on growing core deposits and suggests several steps banks can take to attract and sustain deposits. These include recognizing the importance of branches and developing targeted services.

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Managing Commercial Real Estate Risk

How to Manage Commercial Real Estate Risk in the Post-Pandemic Era

Community banks, by their very nature, tend to have higher concentrations of commercial real estate (CRE) loans than larger institutions. This article explains that any concentration in certain types of loans, borrowers or collateral exposes banks to heightened risks, so banks need to be proactive in managing CRE concentration risk. It also points out that a confluence of recent trends has elevated CRE risks for many banks.

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Brief summary of recent trends in banking

Fall 2023

This brief summary of recent developments in banking discusses the risks and rewards for banks of doing business with marijuana-related businesses, explains new interagency guidance on managing third-party risk and warns banks to avoid engaging in “digital redlining.”

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DOWNLOAD SUMMER 2023

Inside Summer 2023 Issue

Recent Bank Failures Raise Regulatory Scrutiny

In the Wake of Bank Failures - Expect Increased Scrutiny from Regulators

The failures of Silicon Valley Bank and Signature Bank and the self-liquidation of Silvergate Bank in March 2023 served as wake-up calls for banking regulators and lawmakers. Although industry experts agree that steps must be taken to avoid similar failures in the future, they disagree over whether the solution is to implement stricter banking regulations or simply to improve oversight under existing regulations. This article suggests that, whatever the answer, banks can expect regulators to watch them more closely, particularly regarding capital, liquidity and interest rate risks.

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Avoid Jeopardizing Your SBA Guarantees

Don't Take Government Guarantees for Granted
How to avoid jeopardizing your SBA guarantees

Banks that participate in U.S. Small Business Administration (SBA) lending programs must comply with all SBA requirements and standards to ensure that the government will honor its loan guarantees. This article explains that these loans allow banks that follow prudent lending practices to expand customer base, reduce risk, boost lending capacity (the guaranteed portion of these loans doesn’t count toward a bank’s legal lending limit), and improve liquidity (the guaranteed portion can be sold on the secondary market).

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Brief summary of recent trends in banking

Summer 2023

In this brief summary of recent developments in banking, we look at two “junk fee” practices that the Consumer Financial Protection Bureau has deemed likely to be unlawful and discuss whether banks should amend their employee retirement plans in light of recent SECURE 2.0 Act of 2022 provisions.

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Proactive Due Diligence on Loans Pays Off

How Can Financial Due Diligence Support Your Loans?

Many currently problematic loans once looked good on paper — but now, aren’t worth the paper they’re printed on! This article points out that to ensure a bank doesn’t succumb to the lure of loans that seem to be — and are — too good to be true, it’s important to have a policy of conducting proactive due diligence practices from the start. It provides several steps to take and lists some common ratios that are useful in assessing risk. The article notes that due diligence is key in helping loan portfolios remain stable and profitable over time.

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DOWNLOAD WINTER 2023

Inside Winter 2023 Issue

8 tips for successful transition planning

Managing Transition Risk

Managing Transition Risk
8 tips for successful succession plan

One of the biggest challenges community banks face today is a shortage of banking talent. So, it’s critical for banks to develop a solid succession plan to manage transition risk. When key management personnel retire or leave unexpectedly, a succession plan helps ensure that the bank is prepared for the change and proactively addresses the vacancy.

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Managing Liquidity Risk

Stay on Top of Liquidity Risk

In an uncertain economy, with rampant inflation and other significant economic headwinds, it’s a good idea for community
banks to ensure their loans are based on sound funding sources and that the degree of liquidity risk they’re carrying is reasonable and manageable for the foreseeable future. This means your bank needs to have adequate procedures in place to mitigate risk and stay solvent through tough times.

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Is Blockchain the future of banking?

Is Blockchain the Future of Banking?

Blockchain, the technology behind Bitcoin and other cryptocurrencies, has been in the news a great deal in recent months. Headlines about the volatility of cryptocurrencies and their relative lack of regulatory oversight have generated wide- spread skepticism about the technology. But the uses of blockchain go well beyond cryptocurrency. And its potential benefits for banks have led many to believe that blockchain is poised to transform the industry.

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Interest Rate Risk

Monitoring and Managing Interest Rate Risk

For community banks, interest rate risk is a part of doing business, so it’s critical for banks to monitor that risk and take steps to control it. The “right” level of risk depends on several factors, including the size and complexity of a bank’s operations, as well as the sufficiency of its capital and liquidity to withstand the potential adverse impact of interest rate fluctuations.

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Brief summary of recent trends in banking

Winter 2023

In this issue we highlight the main points of the new NACHA rules that are effective September 16, 2022 for "Micro-Entries"and the fraud detection requirements that are effective march 17, 2023.We also discuss the federal banking agencies' new proposal to modernize their CRA regulations and the warning from the CFPB to lenders that use "black box" for credit decision making.
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DOWNLOAD FALL 2022

Inside Fall 2022 Issue

Managing Third-Party Risk

Are You Managing Third-Party Risk?

Banks increasingly are turning to outside vendors and partners to enhance their products and services, gain access to innovative technologies, benefit from expert advice, increase efficiency and reduce costs. This article notes that it’s important to have processes in place for managing the risks associated with these third-party relationships, and explains that federal banking regulators have high expectations for banks when it comes to third-party risk management. A sidebar summarizes recent Fintech due diligence guidance for community banks.
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Adding new business lines to increase earnings

How to Expand Options and Improve Your Bank's Bottom Line

Community banks continue to deal with economic uncertainty as a result of the COVID-19 pandemic and its impact on businesses and organizations. They’re also faced with an increasingly rapid pace of technological change affecting many aspects of banking. This article suggests that banks may want to consider adding some new business lines that can increase their fee income and help stabilize profits.
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Are you ready for a new cyberincident reporting rule?

Ready for the New Cyberincident Reporting Rule?

Banks are now required to report significant cyberincidents within 36 hours, under a new rule issued by the Federal Reserve, Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC). This article explains details of the rule and answers some frequently asked questions about it.
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Brief summary of recent trends in banking

Fall 2022

In this summary of recent developments in community banking, we highlight the main points of the Office of the Comptroller of the Currency’s latest installment of its Semiannual Risk Perspective, explain that the IRS has finalized its guidance on the tax consequences of the LIBOR transition and discuss the most recent ransomware advisory from the Financial Crimes Enforcement Network.
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DOWNLOAD SUMMER 2022

Inside Summer 2022 Issue

CECL adoption a bank priority

How to Expand Options and Improve Your Bank's Bottom Line

By now, all banks are familiar with the CECL model for estimating credit losses, and most have taken concrete steps toward adopting it. This article notes that banks that are behind schedule in their transition efforts need to kick those efforts into high gear. It explains that it’s also important for banks to evaluate — and, if necessary, update — their policies, procedures, systems and internal controls to ensure credit losses will be properly calculated and documented. A sidebar points out that the FASB has indicated that no further deferrals are expected.
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Stress testing - bank's potential risks

Under Stress - conduct stress testing to stay competitive

Stress testing enables banks to simulate specific “disaster” scenarios and evaluate the bank’s (or loan’s) potential for withstanding them in terms of earnings, capital adequacy and other financial metrics. This article explains that such testing can provide valuable information about potential risks that community banks can use to stay afloat through inevitable economic ups and downs.
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Is cryptocurrency in your bank's future plans?

Is cryptocurrency the future of banking?

The popularity of bitcoin, ether and other cryptocurrencies has exploded in recent years. But an absence of federal oversight “leaves consumers open to scams and dangerous price volatility,” many lawmakers warn. This article explains that this lack of oversight may change in the near future and discusses a recent executive order that signals support of the potential benefits of creating a U.S. Central Bank Digital Currency.
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Brief summary of recent trends in banking

Summer 2022

In this brief summary of recent developments in banking, we look at a recent Consumer Financial Protection Bureau announcement that it will expand its antidiscrimination efforts to situations in which fair lending laws may not apply, including include servicing, collections and consumer reporting. In addition, we explain the Financial Crimes Enforcement Network’s Rapid Response Program for cyber-enabled financial crime and highlight a recent FDIC notice requirement for banks involved in crypto activities.
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DOWNLOAD WINTER 2022

Inside Winter 2022 Issue

FINCEN's new AML/CFT priorities

FinCEN’s National AML/CFT priorities set the tone

In June 2021, the Financial Crimes Enforcement Network (FinCEN) issued its first set of government-wide priorities (the Priorities) for anti-money laundering and countering the financing of terrorism (AML/CFT). As required by the Anti-Money Laundering Act of 2020 (AML Act), the Priorities identify and describe the most significant AML/CFT threats currently facing the United States.
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Should your bank use third party vendors?

Re-imagining branch banking for the digital age

Keeping branch banking profitable in the digital age

The COVID-19 pandemic has led to an increase in online banking. However, the transition to
virtual banking was already well underway.As community banks look to the future, they need to
re-imagine branch banking for the digital age. This means strengthening what’s working and getting rid of what isn’t. Direct banking at branches can still be vital to community banks’ financial health as long as they measure branch performance and correct as necessary.
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Managing risk for online account opening

Your bank's cyberattack ransomware plan

What's your Bank's plan to counter ransomware attacks?

Cybersecurity continues to be a key risk that businesses face today, and banking is among the industries most affected by cyberattacks.Some experts estimate that around a quarter of all
malware attacks target financial institutions. Of particular concern are ransomware attacks, which have increased dramatically in the past couple of years.
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Brief summary of recent trends in banking

Winter 2022

In this summary of recent developments in banking, we discuss the new deadline for compliance with the CFPB’s revised general qualified mortgage rule and how banks should prepare, look at the new lease accounting rules, and take note of a new guide for banks published by the federal banking agencies on conducting due diligence on FinTech companies.
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DOWNLOAD FALL 2021

Inside Fall 2021 Issue

COVID-19's impact on your UDAAP Program

UDAP resurfaces- Is your bank in compliance?

The Dodd-Frank Act gives the Consumer Financial Protection Bureau (CFPB) broad authority to prosecute unfair, deceptive or abusive acts or practices (UDAAP) by banks and other financial providers. Early last year, the CFPB announced a new policy that gave institutions a reprieve from UDAAP enforcement actions. But in March 2021, it rescinded this policy, signaling a return to more aggressive enforcement.
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Improve customer satisfaction and retention

Keep your customers satisfied

Over the past few years, community banking has withstood rapid technological changes, unprecedented economic challenges during a pandemic and new demands from its customer
base. To maintain profitability amidst all this turmoil,you need to ensure that your bank retains its existing customers. After all, studies show that attracting a new customer typically costs five times more than retaining an existing one
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COVID-19's impact on bank's internal controls

Maintaining internal controls in a post-pandemic environment

Internal controls are the lifeblood of a bank’s risk management system. Weak or ineffective
controls can lead to operational losses and expose a bank to a higher risk of fraud. As we continue to recover from the COVID-19 pandemic, banks need to assess the pandemic’s impact on their internal control systems and make appropriate adjustments.
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Brief summary of recent trends in banking

Fall 2021

This brief summary of recent trends in banking highlights Consumer Financial Protection Bureau answers to FAQs on unauthorized electronic fund transfers and discusses a Federal Reserve tool that simplifies CECL implementation. It also notes the OCC’s intention to rescind a 2020 Community Reinvestment Act rule.
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DOWNLOAD SUMMER 2021

Inside Summer 2021 Issue

COVID-19's impact on your BSA/AML Program

Time to revisit your AML program

The COVID-19 pandemic has impacted anti-money laundering (AML) compliance in many ways. It has increased risks, changed the behavior of bank customers, and accelerated implementation of online account opening and other technologies. This article suggests that in light of these changes, all banks should evaluate their AML programs, starting with a risk assessment. A sidebar looks at the Biden administration’s increased prioritization of compliance with the Anti-Money Laundering Act of 2020.
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Pros and Cons of asset Concentration

The pros and cons of asset concentration

The purpose of community banks is to serve their particular communities and the industries that fuel those local economies. This can lead to potential risk, including losses, if assets become concentrated in an industry that is struggling. This article points out that there are pros and cons to asset concentration — the key is to understand how to keep the right balance.....Read the full article

Has COVID-19 impacted your CRA rating?

Has COVID-19 hurt your Community Reinvestment Act rating?

The COVID-19 pandemic has had a significant impact on community banks and their customers, but one area that is often overlooked is the potential impact on a bank’s Community Reinvestment Act (CRA) rating. This article notes that to mitigate the risk of receiving a poor CRA rating, a bank should identify and document the various factors — both bank-specific and community-specific — that influence its lending ability......Read the full article

BANK Wire - Summer 2021

This brief summary of current developments in community banking discusses LIBOR transition guidance that the Federal Reserve recently issued and notes the reintroduction of the SAFE Banking Act in Congress. It also explains that the federal banking agencies are seeking information about how financial institutions are using artificial intelligence in their activities. Finally, it lists some consumer protection recommendations put out by the CFPB’s Taskforce on Federal Consumer Financial Law.....Read the full article